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August 2009

Can Zimbabwe Turn the Corner?

Submitted by Praveen Kumar on Mon, 2009-08-31 15:11

Much has changed in Zimbabwe since last November. There are signs of recovery following the return of price stability after full dollarization in January. However doubts about the political situation continue to obstruct further recovery.

The most visible sign of improvement is the demise of surreal hyperinflation which according to one estimate peaked at about 80 billion percent. Interestingly, full dollarization initially occurred not because the government chose it as a deliberate stabilization measure.  Exasperated residents simply abandoned the Zimbabwean dollar and moved on to using multiple hard currencies.  In January, the Government too abandoned the Zimbabwean dollar and started using the US Dollar and the South African Rand for both collecting taxes and spending.  Hyperinflation died a natural death in Zimbabwe, it was not tamed.

A Daughter Deficit in Africa?

Submitted by Shanta on Thu, 2009-08-27 10:10

An excellent special issue of the New York Times magazine on Women and Development  had an article on the “daughter deficit”—the phenomenon, observed in India and China, of many fewer girls than boys being born, and surviving to age 5.  Up to now, I had been thinking of this as an Asian phenomenon, associated with cultural values in India and China.  But the finding by my colleagues Jed Friedman and Norbert Schady, reported in this blog , that in Africa the mortality rate from a drop in income is about twice as high for girls as for boys, makes me think that the daughter deficit (or “son preference”) may be coming to Africa. 

Are Fragile States "Too Poor to Grow?"

Submitted by Shanta on Tue, 2009-08-25 11:56

Boy plays with tireA recent paper by my colleagues Humberto Lopez and Luis Serven entitled “Too Poor to Grow” asks whether, controlling for other factors, countries with higher poverty rates grow more slowly.  Their answer is “yes”.  The implication is that countries with high poverty may be caught in a poverty trap—they grow more slowly, so poverty rates stay high or even increase, which means they grow even more slowly, and so on. 

The idea echoes the one in Martin Ravallion’s post on this blog about why poverty rates are not converging. 

The two papers got me thinking about the large number (20) of fragile states in Africa.   These states have lower per-capita incomes and growth rates than non-fragile states.  More importantly, many of them have remained fragile states for a long time. 

Could it be that these countries are caught in a low-level equilibrium trap?  And if so, should aid policy—which treats them as worse-performing versions of non-fragile states—be adjusted to take into account the possibility that these countries are “stuck” in low growth, high poverty and poor governance?
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UPDATE: August 27, 2009:

Thanks to all who are taking the time to share their views on this post. Many of you seem to think that education can offer a way out of this vicious cycle. Some don't see hope for Africa until corruption can be successfully tackled. A few others advocate for more individual responsibility.  I was particularly impressed by the story David Kamulegeya shared with us (see the comment titled "it is about the attitude that people have about themselves") in which he describes his own experience navigating out of poverty.

A New Look for the Blog

Submitted by Shanta on Tue, 2009-08-25 09:29

Today we launch a new look for the AfricaCan blog.

The enhancements include links that are easier to spot. Also, we have added a list of guest bloggers and a blog roll listing some of the sites I regularly visit. You can find them on the menu on the right.

Over the next few weeks, we will continue to fine-tune the blog to ensure we have the platform necessary to best serve our community of readers. 

In the meantime, let me take this opportunity to thank you all for sharing your views about how Africa can end poverty.

Infant mortality rates in Africa will increase by 30,000-50,000 - Girls will fare worse

Submitted by Norbert Schady on Tue, 2009-08-11 02:00

The impact of the global financial crisis on infant mortality is a topic of great policy importance. However, estimates of the likely impacts of the crisis, cited by international institutions and in the popular press, differ wildly.

This blogpost summarizes the main conclusions from some of my own recent research on this topic, jointly with various colleagues.

These conclusions include:

1. The effect of negative growth on child health, including infant mortality, varies a great deal across countries. In developed countries, such as the US, infant mortality decreases when there are negative economic shocks. In low-income countries, including in India and countries in Sub-Saharan Africa, infant mortality increases in those periods (see Ferreira and Schady 2009 for a discussion). The picture for middle income countries is mixed, but on balance, it is closer to that found in the US. Important exceptions are cases in which the economic contraction was very severe--maybe 15 percent or larger. That was the case in two crises in Peru, and in Indonesia in 1998 (see Paxson and Schady 2005 and Schady and Smitz 2009).

African economic policies and the global crisis: Orthodox responses to a heterodox shock?

Submitted by Shanta on Sun, 2009-08-09 22:02

When the global economic crisis hit Africa, I worried (along with others) that the continent’s economic reforms would be stalled or reversed.  Political support for these reforms may be undermined as economic growth slowed.  Furthermore, the response of high-income countries in response to the crisis—large fiscal deficits and greater government participation in the banking sector—was in the opposite direction of the reforms that African countries had been pursuing in the past decade.

In fact, the response of African governments has been largely to maintain, and in some cases accelerate, their reform programs: 

- Zambia, for instance, is running a modest fiscal deficit (2.6 percent of GDP) while maintaining the medium-term expenditure program it had established before the crisis. 

- Tanzania’s emergency program includes government support to the banking sector that is strictly time-bound, something that the U.S. program lacks. 

- The Democratic Republic of Congo used an emergency credit from the World Bank to finance infrastructure maintenance and teachers salaries. 

- Nigeria is planning to deregulate its downstream petroleum sector, which will generate substantial savings from reduced subsidies.

The reasons for these responses are many.  First, in low-income countries, a large fiscal stimulus can have impact only if it is financed with additional external resources and with the exception of “front-loading” of already-committed aid, these additional resources have been lacking during the crisis.